Chaffetz: Boost Innovation With Fair and Equal Internet Radio Royalties

A lot has changed in the music industry since the days when our parents and grandparents tuned the dial on their radios. The most prolific changes in music consumption have coincided with the development and rise of digital technologies over the past five years. Advances in mobile technology and broadband deployment make listening to music anytime and anywhere a reality.

These innovations have helped the music industry to prosper. Unfortunately, some of the most popular and innovative digital music services have been placed at a competitive disadvantage by the current copyright royalty rate system, which clearly discriminates against Internet radio.

The policies governing Internet radio have not kept pace with advancements in technology. In an effort to update the law, I, along with Democratic Rep. Jared Polis of Colorado, introduced bipartisan legislation, the Internet Radio Fairness Act, to correct this inequity by using one proven standard for determining copyright royalty rates for all digital providers.

Currently, Internet radio services pay more than six times the royalty rates for digital performance rights paid by other forms of digital radio, such as satellite and cable. A system that clearly favors some providers over others, picking winners in the music marketplace, is not good public policy. It’s time to level the playing field.

The legislation would place Internet radio under the same rate-setting standard used for every other music service that pays set rates, including satellite and cable radio. This is the same standard used to determine the royalty rates that record labels must pay songwriters. This proven standard for negotiating royalty rates strikes the appropriate balance between rewarding musicians for the art they create and fostering innovative digital music technologies that provide services to millions of Americans. This bill would also update and simplify the ways in which the royalty rates applied under the standard would be appealed and arbitrated.

The legislation’s goal is to establish fairness, consistency and transparency in the rate-setting process and the outcome. This bill would allow for natural, market-based competition, rather than the procedural favoritism that exists under the current standard. It also would halt the current discrimination against services just because they happen to be delivered over the Internet.

Why does this matter? Digital broadcasting services represent Internet entrepreneurship and foster innovation. They’ve helped to contribute to the Internet economy that is a vibrant part of America’s economy. And they provide jobs.

But these services have been operating at a severe disadvantage in the marketplace because of the imbalance in royalty rates. Those disproportionately high rates have discouraged new entrants in the digital radio space and have driven out many of the established Internet radio services, which otherwise might have flourished in response to increasing demand.

Internet radio deserves an even playing field to grow and foster new, emerging technologies.

Without musicians we wouldn’t have music, regardless of the vehicle we use to listen to it. We need to make sure that any system we establish rewards musicians by protecting their intellectual property through appropriate copyright payments. In fact, digital services have helped to promote musicians — a great number of the artists whose music is available via Internet radio are independent, and many of them might never find their way onto traditional radio.

A more reasonable rate standard will encourage investment and growth in technologies like Internet radio that best meet the demands of the market. This will create jobs and provide more choices for music listeners and more opportunities for artists.

Furthermore, the affordable, accessible services provided by Internet radio have helped to protect musicians by discouraging illegal file-sharing, as music is readily and legally available on demand, with copyright payments made to the artists.

Congress enacted the royalty rate standard for Internet radio 14 years ago, when it was barely a concept and long before today’s prominent providers even existed. It’s well past time to correct the mistake and stop discriminating against Internet radio.

Rep. Jason Chaffetz, R-Utah, is a member of the Judiciary Subcommittee on Intellectual Property, Competition and the Internet.